There’s increasing help in the workplace for those planning retirement or struggling with debt. “Financial well-being” is this year’s “financial education” and the healthcare organisations have worked out that a solvent workforce is a workforce less likely to suffer from sickness.
But the financial base on which most of us build is our home. The big problem facing young people is that they do not have a home, only a room in someone else’s home or a flat which they can hardly call a home – so strict are the rental restrictions and weak their tenancy rights.
The numbers are startling. According to the social mobility commission, 63% of 20-29 year olds owned their own home in 1990. By 2015, that number had fallen to 31%.
Unusually, the housing problem is not being solved through work , but through the family unit. More than a third of homebuyers in England depend on money from their family.
Using the latest official data available, from 2013-14, Paul Sanderson and a team from Anglia Ruskin University found 34% of buyers needed cash or a loan from their parents.
That compared with just 20% in 2010/11. A further 10% of buyers relied on inherited wealth, the research found..
Legal and General confirm that a quarter of all mortgages in the UK last year were part-funded by parents. The average amount given was £17,500.
Helping your younger staff get the first foot on the ladder.
It is odd that relativley little is being done in the workplace to promote routes to ownership for the under 30s. The Government are aware of the issues and have put in place a number of initiatives
The Mortgage Guarantee scheme has now run it’s course but the help to buy scheme is going strong.
Help to buy
Help to Buy gives people who are able to get a mortgage the chance to buy a home with just a 5% deposit.
I’m grateful to the Legal and General Website for this explanation of how the help to buy equity loan works.
The Government lends you up to 20% of the cost of your new-build home. It runs until 2020 and is only available in England (though there are similar arrangements for other parts of the UK.
It only applies to new build homes from a registered Help to Buy builder. Your Help to Buy agent should have a list of registered builders for you to choose from.
For buyers in all London boroughs, the Government has increased the scheme’s upper loan limit from 20% to 40% to reflect the current property prices.
How it works:
- You can apply for the equity loan if you have a 5% deposit and you’re after a new build property.
- The equity loan can be worth up to 20% of the cost of your newly built home.
- As the equity loan can be worth up to 20% and you have a 5% deposit, the mortgage you need is therefore based on 75% of the cost of the property.
Benefits:
- Available to both first time buyers and those moving from another property they have sold.
- Helps you out of renting and onto the property ladder.
- The equity loan is fee free for the first five years.
- You can wait until you sell the property before you pay the loan back.
Need to know:
- In the sixth year, you’ll be charged a fee of 1.75% of the loan’s value. After this, the fee will increase every year.
- Loans are available on properties worth up to £600,000.
- You can’t go on to sublet the house.
- You can’t part exchange your previous property.
- You won’t be eligible to take the equity loan if you own any other property.
- After 25 years or when you sell your house whichever is earliest, you’ll have to repay the whole equity loan. The repayment amount is based on the percentage you borrowed (up to 20%) and not the original loan amount. For example, if you bought a £200,000 house and borrowed 20% through Help to Buy Equity Loan, then sold the house for £220,000, you’ll need to pay back £44,000, not £40,000.
- The property must be bought on a repayment basis, interest only isn’t available.
- Not all lenders offer Help to Buy mortgages, so your choice of mortgage may be limited.
- If you want a further advance or to alter or extend the property, you’ll need to obtain permission from the Post Sales Help To Buy Agent.
How to apply:
You need to speak to a Help to Buy agent, who are supplied by the government. They’ll talk you through the scheme to find out whether it’s right for you. You can find them on http://www.helptobuy.org.uk/equity-loan/find-helptobuy-agent.
Building new homes
For help to buy to work, we need affordable new homes being built in parts of the country in which people are able to find the jobs to meet housing costs. Work is the vital link in all this.
Sharing home ownership
If we are serious about ideas like inter-generational fairness, we need to treat the housing issue as more than a job for the “bank of Mum and Dad”. I have written on this blog about the good work of unmortgage. They are only one of many organisations aiming to increase shared ownership of property between those who have the money (the big financial institutions looking for a steady income stream) and those who don’t!
The demand for shared ownership is clear. Go to https://www.sharetobuy.com/ to see the diversity of arrangements which are coming to market.
What are you doing?
We (First Actuarial) are interested in extending the work we do around retirement, to those who are building the platform for their later-life saving (through home-ownership or assured tenancy).
If you work for an organisation that is actively helping younger staff get on the housing ladder, we’d be interested in details. You’ll appreciate that as pension consultants this is not home ground!
We’d be particularly keen to hear from social housing organisations about what they are doing both for their staff and for others.
If you’d like to help us out in this, please contact henry.h.tapper@firstactuarial.co.uk or Natalie.ogden@firstactuarial.co.uk .
Henry
The problem here is not finance, it is the price of housing. This will not go away unti we start building enough houses to meet demand – the shortage is over one million homes and demand is growing at around 250,000 a year. The roots of the issue are clear, the post-war planning laws, with the issue being compounded by the policy of selling council kousing – littleof the proceeds from those sales went back into new housing, and councils had built a fairly steady 120,000 or so a year – this in fact is remarkably close to the annual shortfall.
It is odd, but we still demonise the inner city council estate, even though the majority of that stock is now owned privately by members of the middle class. Increasingly, that “sink” problem is moving away from the inner to the outer city – and we see the same thing in France with the banlieu.
Solving the finance problem will just exacerbate the price issue. Is there a solution – well the answer is yes – build more houses, lots of them – step up production from the current 130,000 or so to closer to 300,000 (which is probably the upper feasible limit given labour constraints).
Will this happen – of course, not. Do you want to be the politician that tells houseowner voters that he or she want to build sufficient housing to make sure their house does not increase in price and may even go down. If you can find a way to get elected with that agenda, you will solve the problem, and be one hell of a magician.By the way, I will vote for you, if allowed.
Con
And they need to make nicer quality, lower density housing too.
These new builds are horrible and purely profit maximised.
While the big builders are all motivated by huge margins consumers get terrible vfm.
There are a lot of new builds going up in Harrogate right now and they’re all horrible.
Gardens west or north facing. Roads a few feet off the front door. No trees. Apparently large designs, but they’re ‘mini’ houses. 4 bedrooms you can’t use with double beds and furniture!
The while system from top to bottom is all about greed and money.
It won’t change while people see a home as an investment and a spineless government perpetuate it.
UK gov should print their (our) own money at zirp, pay off the 1tn debt, and spend the saved ‘interest’ to bank vampires by building housing stock at zero interest rates for all.
Houses/homes are infrastructure, if you want a happy populace buying stuff and breeding and feeding a strong economy, they need cheap homes and low taxes/debts.
Help to buy?
More like, help to inflate the prices of the very think you’re struggling to buy with government enabled debt you probably can’t afford today, never mind 5 years later.
For government to get in on this kind of pyramid scheme tells us what government thinks of the plebs.
And the pension industry are busy telling young people to save for retirement!
With what?
These pseudo socialist government incentives that appear helpful, while actually only existing to support a failing ponzi, is a travesty.
Those taking them must be stupid. Those who dreamt them up are as corrupted as the types who run Wonga loans or ‘kneecap finance’
I noticed that in Church Crookham, Hampshire, new build houses were over £400k for a very small 3 bedroom place with little garden. 2 beds were £360k approx. My daughter was looking recently which is why I mention it. She has opted for a larger secondhand 3 bed semi with large garden and garage near Aldershot (perhaps not as expensive as Church Crookham, but 42 mins to Waterloo on the train isn’t bad!). This was on the market for £320k.
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I know new houses command a premium but I wonder if the builders are marking up the prices a bit more as they know the equity loan is available? I remember tiny studios in around 1989 for sale for approximately £40k in Woking, which were almost impossible to shift just after the Lawson boom in the early 90s. 15% interest rates – exchange rate mechanism – what joy!
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I wonder if my pension fund could help buy my daughter a house? She can pay me back gradually over 25 years, or thereabouts, on a 3% interest fixed repayment basis. When I’m gone she will inherit whatever I have left anyway, so I might even drop the loan to 2%!
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http://www.zopa.com for mortgages perhaps?
Henry I have decided to help a builder who builds homes not boxes which are socially responsible green energy efficient and in a mixed community is social housing affordable and some private sector. Lazy capital languishing in duff financial product can be harnessed bypassing the banks. Watch this space who knows duff gilts might be replaced in pensions